The decline in value of the US dollar is good and bad for Hong Kong. While the fall boosts our competitiveness with economies that do not follow the greenback, the more it drops, the greater our inflation. Weighing such positives and negatives is a delicate matter. The foreign companies and talent being attracted to our shores are welcome, as is the money pouring into our stock market and property sector. But the downside is that imports from economies without a US dollar link are increasing in price, putting the most vulnerable in our society at risk. The double-digit inflation we suffered during the 1990s greatly affected the poor and a repeat has to be avoided. Doing so is not straightforward, given the Hong Kong-US dollar peg. The US dollar may be the global reserve currency and its weakness is causing a measure of anxiety among governments holding it, but Americans are generally unfazed. For them, a poorly performing dollar means a shrinking of America's US$57 billion foreign trade deficit. Exports increase, demand for the goods and services of US companies rises, and more overseas tourists are attracted to the country. The impact is far wider, however. Many of the records of recent days - new highs for oil and gold, and stock market indices from Hong Kong to Australia to South Korea and beyond - are largely down to US fiscal and political policies. US President George W. Bush's government is running a record budget deficit, spending far in excess of what it has to hand and paying hundreds of billions of dollars servicing debt. Americans themselves are equally deeply in debt. They have more owing in loans than they have in savings, with the cash tied up in housing or shares. The extent of the sub-prime mortgage fiasco, which is helping drive down confidence in the dollar, is yet to be fully revealed, but the ramifications are severe and global. US property prices are in decline. With so much of the nation's retail sector based on imports, prices are increasing. Stock markets rose higher yesterday on the expectation that the US Federal Reserve will cut interest rates again. This would be an effort to alleviate the US' economic problems; if Hong Kong were to follow suit, the likelihood of increased inflation here would rise. Interest rate cuts are short-term solutions. They do nothing about growing perceptions that with the rise of China and India, the US - and in consequence, its currency - is in decline. We need to give this consideration. Delinking the Hong Kong dollar peg to the US dollar is a gradual matter, though: the uncertainty caused by a new fiscal strategy is not something Hong Kong wants or needs now. Governments the world over put the national interest first and this is what the Bush administration has been doing with its economic policies. Nonetheless, international fears that its currency could soon be in free fall need to be addressed. Balanced current accounts increase confidence in economies and national currencies. Putting in place taxation policies that encourage citizens to save rather than spend are also long-accepted means of boosting financial systems. Hong Kong is in no position to lecture Washington about running its economy, just as we would not take kindly to being preached to about operating our own. Global reserve currencies are not domestic matters, however, and the US therefore has a responsibility to look beyond its borders when considering fiscal issues.